1. Annual fee — A bank charge imposed each year for use of a credit card. It may also be called a membership or participation fee. It can range from $15 to $300, and usually gets billed directly to the customer’s monthly statement. Many credit cards have no annual fee.

2. Annual percentage rate, or APR — A yearly interest rate that includes fees and costs paid to acquire the loan. Lenders are required by law to disclose the APR. The rate is calculated in a standard way, taking theperiodic rate and multiplying it by the number of billing periods in a year.

3. Annual percentage yield, or APY — The percentage required by Truth in Savings Act regulations to be disclosed on interest-bearing deposit accounts. It reflects the total interest to be earned based on an institution?s compounding method, assuming funds remain in the account for a 365-day year.

5. Average daily balance — This is the method by which most credit cards calculate a customer’s payment due. An average daily balance is determined by adding each day’s balance and then dividing that total by the number of days in a billing cycle. The average daily balance is then multiplied by a card’s monthly periodic rate, which is calculated by dividing the annual percentage rate by 12. A card with an annual rate of 18 percent would have a monthly periodic rate of 1.5 percent. If that card had a $500 average daily balance, it would yield a monthly finance charge of $7.50.

6. Balance transfer — The process of moving an unpaid credit card debt from one card to another. Card issuers sometimes offer teaser rates to encourage balance transfers coming in and balance-transfer fees to discourage them from going out. Customers making a balance transfer should know exactly when the introductory teaser rate expires so they don’t get caught paying a higher rate later.

7. Brokerage account — An account at a securities firm or brokerage that can hold investments, such as stocks, bonds, mutual funds and exchange-traded funds, or ETFs. Cash not invested is generally held in a money market fund.

8. Cash-advance fee — A bank charge assessed to a customer who uses a credit card to obtain cash. This fee can be charged as a flat per-transaction fee or as a percentage of the amount of the cash advance. For example, the fee may be expressed as follows: “2%/$10.” This means the cash advance fee will be the greater of 2 percent of the cash advance amount or $10.

A bank may limit charges to a specific dollar amount. Depending on the bank issuing the card, the cash-advance fee may be deducted directly from the cash advance at the time the money is received or it may be posted to the customer’s monthly bill as of the day the customer received the advance. Interest accrues from the moment the money is withdrawn.

9. Compound interest — Interest determined by adding the interest earned in the current period to the principal and computing the next period’s interest based on this “compounded” total amount.

10. Consumer Credit Protection Act — Passed in 1968, this legislation spelled out basic consumer protections, including Truth in Lending disclosures. It requires creditors to state the cost of borrowing in understandable terms to allow consumers to figure out how much loans would cost.

12. Debt-to-income ratio — The percentage of before-tax earnings spent to pay off loans for obligations, such as auto loans, student loans and credit card balances. Lenders look at two ratios. The front-end ratio is the percentage of monthly before-tax earnings spent on house payments (including principal, interest, taxes and insurance). In the back-end ratio, the borrower’s other debts are factored into the ratio.

13. Fair Credit Billing Act — Passed by Congress in 1975 to help customers resolve billing disputes with card issuers. The act requires issuers to credit payments to a customer’s account the day they are received. However, each issuer is allowed to set specific payment guidelines. If any of the guidelines are not met, the issuer can take as many as five days to credit the payment. To be protected under the law, customers who discover a billing error must write to the issuer within 60 days of the mailing date on the bill with the error. The issuer is then required to investigate and either correct the mistake or explain why the bill is correct, and to do so within two billing cycles. The issuer also must acknowledge a customer’s complaint in writing within 30 days.

14. Fair Credit Reporting Act — A federal law that governs what credit bureaus can report and for how long. It outlines procedures for correcting errors in credit reports. It also requires credit bureaus to issue copies of consumers’ credit reports upon request.

16. Finance charge — The charge for using a credit card, comprised of interest costs and other fees, including finance charges for cash advances and balance transfers. Most credit card issuers use the single-cycle average daily balance method to calculate finance charges. Some, however, may use thedouble-billing cycle.

17. Grace period — The interest-free time some lenders allow between the transaction date and the billing date. It is sometimes — but not always — granted when the credit card user does not carry a balance, and typically lasts between 20 and 30 days. If no grace period exists, finance charges accrue the moment a purchase is made with the credit card. People who carry a balance on their credit cards have no grace period.

18. Gross income — All the money, goods and property an individual receives during the year before it is reduced through adjustments, deductions and exemptions. People who use the barter system have to include the value of whatever they’ve received in exchanged for services as part of their gross income.

19. Household income — The total income of all members of a household, it is an important yardstick used by lenders evaluating applications for joint credit.

20. Individual Retirement Account, or IRA — A special retirement planning account for individuals. All or part of the contribution in a tax-deferred savings account may be deductible from current taxes, depending on the individual’s income and status regarding coverage by an employer-sponsored qualified retirement plan, such as a401(k) plan. Penalties usually apply for withdrawals before age 59½. Withdrawals are taxed as income. See alsoRoth IRA.

21. Introductory rate — Often called the teaser rate, it is the below-market interest rate offered to entice customers to switch credit cards or lenders. Borrowers are urged to pay attention to the regular APR, which is the interest rate that applies once the introductory rate expires.

22. Late fee — The charge tacked onto tardy payments. Late penalties average from $30 to $35 per month.

23. Minimum payment — The minimum amount a cardholder must pay to keep the account from defaulting. Usually this amount comes to 2 percent of the outstanding balance.

24. Money market account, or MMA — A high-yield, FDIC-insured savings account that allows consumers to put their money into accounts that have higher yields than passbook or statement savings accounts. In exchange for the higher rate of interest earnings, consumers usually have to accept more restrictions on withdrawals.

25. Money market mutual fund — A mutual fund that invests in short-term debt instruments, such as Treasury bills, commercial paper and large CDs. Also referred to as money market fund, or MMF.

26. Mutual fund — An investment that uses money pooled together from many different investors to purchase stocks, bonds and/or other securities.

27. Non-dischargeable debts — A debt that cannot be eliminated in bankruptcy. Examples may include some taxes and federally guaranteed education loans.

28. Over-the-limit fee — The charge for exceeding the credit limit on a card. It generally costs around $30 to $35.

29. Parking — A term that refers to depositing, or parking, cash in a high-yield money market account until you need to move it to a checking account to pay bills.

30. Payment due date — A deadline set by the credit card issuer for receiving payment of a debt. It is the customer’s responsibility to ensure that the payment is actually received by the issuer on or before the payment due date. The postmark date on a payment by mail does not qualify as evidence that the customer has paid before the payment due date. Customers are urged to allow seven to 10 business days for a payment to get to the issuer. Customers who pay online are urged to find out how long payments take to process. In most cases, an online payment is not an instantaneous debit.

31. Periodic rate — The interest rate relating to a specific amount of time. It’s used to calculate the finance charge for each billing period. For example, the monthly periodic rate is the cost of credit per month, while the daily periodic rate is the cost of credit per day.

32. Personal loan — A loan from a lender that is not secured by any property. Rates tend to be similar to those of credit cards, which are another type of unsecured loan. The personal loan rates quoted on Bankrate are for a $3,000 fixed-rate loan and a term of two years.

33. Pre-approved — A status indicating a potential customer has passed a preliminary credit screening as part of a credit card offer. A credit card company can still reject the same customer if it doesn’t like the applicant’s credit rating.

34. Previous balance — The outstanding balance at the end of the last billing cycle. This amount excludes payments made toward the balance.

35. Purchases/new charges — The total amount of new debts incurred during the current billing cycle. Different interest rates may apply to balance transfers and cash advances.

36. Recession — A prolonged period (popularly defined as at least two successive quarters or six months) in which the economy contracts.

37. Roth IRA — An alternative to a traditional IRA in which investors make after-tax contributions and later withdraw the money tax-free. Before making withdrawals, an investor must be at least 59? years old and the account must have been established for at least five years. Contributions to a Roth are not tax-deductible. The Roth is named for Sen. William Roth Jr., former chairman of the Senate Finance Committee.

38. Savings account — Liquid account that generally offers low or no minimum balance requirements. The account usually has no restrictions on the number of transactions, but often carries a monthly service charge and generally pays a low rate of interest. Savings accounts may be opened at banks, credit unions and other financial institutions, including those that offer accounts online. Account holders receive monthly or quarterly account statements showing activity during the statement period.

39. Secured card — A credit card that a cardholder secures with a savings deposit to ensure payment of the outstanding balance if the cardholder defaults on payments. It is used by people new to credit or people trying to rebuild poor credit ratings.

40. Secured debt — A debt that is secured by collateral. If the debtor fails to make payments, the creditor can take possession of the collateral used to secure the debt. A mortgage loan is a common example.

42. Tax-free money market mutual fund — A mutual fund that invests in short-term debt instruments issued by tax-exempt entities at the federal level, and sometimes at the state and local levels. Earnings are not taxed on a federal level, although they may be subject to tax at a state and local level.

43. TIPS, or Treasury Inflation-Protected Securities — Inflation-adjusted bonds issued by the U.S. Treasury. The principal is periodically adjusted for inflation, and the semi-annual fixed interest is paid on the adjusted principal. People who hold TIPS pay tax annually on the interest payment. One drawback of TIPS is that the holder pays taxes annually on the adjustment to the principal even though the adjustment is not received until the holder cashes the bond.

44. Traditional IRA — The original self-directed retirement plan, a traditional IRA allows individuals to contribute money annually based on how much they’ve earned, such as wages, or up to IRS-established limits, some of which are related to age. Contributions may be tax-deductible, partially deductible or non-deductible, depending on the investor’s income and whether or not the individual is covered by a retirement plan at work. Taxes are deferred on traditional IRA earnings, meaning the holder does not have to pay taxes until the money is withdrawn from the account.

45. Treasury bill or Treasury note — Debt issued by the federal government and sold as a security.

46. Two-cycle billing — A billing method that calculates the average daily balance using two billing cycles rather than one. Finance charges are typically higher. This method eliminates the grace period for customers who carry a balance. If the bill is not paid in full at the first billing, interest becomes retroactive back to the purchase date.

47. Universal default — A policy some lenders apply to credit card users who pay any creditor at least 30 days late. The clause allows the issuer of a credit card to change the interest rate charged to a card holder, even if the card holder’s late payment was made to another creditor. In many cases, the new interest rate is dramatically higher than the previous rate.

48. Unsecured debt — Debt that is not guaranteed by the pledge of any collateral. Most credit cards are unsecured debt, which is a major reason why the interest rate on credit cards is higher than rates associated with other forms of lending, such as mortgages (which use property as collateral).

49. Variable interest rate — Percentage that a borrower pays for the use of money, and which fluctuates periodically based on changes in an interest rate index.

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